Sub-Regional Impact of HEIs– IO simulation of demand impacts on the City of Glasgow

K. Hermannsson, P. McGregor, N. Pappas and K. SwalesFraser of Allander Institute,

Department of Economics University of Strathclydeand CPPR

48th Congress of the European Regional Science Association

Liverpool, England, August 27-31, 2008

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Outline

• Overview• Glasgow’s HEIs• Construction of Glasgow City IO• Simulation results• Future Work

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Background

• Impact of HEIs initiative– 15 UK Universities– 9 projects– http://ewds.strath.ac.uk/impact/Home.aspx

• Glasgow project:– Extension of the HEIs impact initiative backed by

CPPR and Strathclyde University– Model the impacts of HEIs at a sub-regional level– Use multi-sectoral regional and inter-regional models– I-O, SAM and CGE

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Glasgow’s HEIs

• Strong presence in the city• Spent £618m in 2006• Staff 10,000 FTE• Students 61,000 (Full time = 48.000)• Diverse institutions

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Income of Glasgow’s HEIs by source

2005/06, £ thousands. (HESA, 2007) GlasgowCaledonian University

Glasgow School ofArt

The Universityof Glasgow RSAMD

TheUniversity OfStrathclyde

Total Glasgow

Funding Council grants 53,130 9,897 130,934 6,096 85,883 285,940

Tuition fees & education grants & contracts 23,026 3,694 53,205 2,276 51,097 133,298

Research grants & contracts 4,262 609 75,439 114 29,398 109,822

Other income 17,123 1,459 47,447 1,490 20,910 88,429

Endowment & investment income 103 140 5,347 402 3,766 9,758

Total income 97,644 15,799 312,372 10,378 191,054 627,247

Funding Council grants 54% 63% 42% 59% 45% 46%

Tuition fees & education grants & contracts 24% 23% 17% 22% 27% 21%

Research grants & contracts 4% 4% 24% 1% 15% 18%

Other income 18% 9% 15% 14% 11% 14%

Endowment & investment income 0% 1% 2% 4% 2% 2%

Total 100% 100% 100% 100% 100% 100%

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Income of Glasgow’s HEIs by source (2)

2005/06, £ thousands. (HESA, 2007) Scottish

Government External incomeOperational

Income Total income

Caledonian 72,149 74% 8,269 8% 17,226 18% 97,644 100%

GSA 11,903 75% 2,006 13% 1,890 12% 15,799 100%

Glasgow 162,982 52% 92,809 30% 56,581 18% 312,372 100%

RSAMD 7,031 68% 753 7% 2,594 25% 10,378 100%

Strathclyde 111,792 59% 45,616 24% 33,646 18% 191,054 100%

Total 365,857 58% 149,453 24% 111,937 18% 627,247 100%

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Staff FTE by activity2005/06, £ thousands. (HESA, 2007)

Glasgow CaledonianUniversity

Glasgow School of Art

The University of Glasgow RSAMD

The University ofStrathclyde

Total Glasgow

Academic professionals 833 117 2,047 46 1,258 4,300

Non-academic professionals 83 14 366 8 139 610Technical support, student support,

library 431 90 1,028 42 757 2,348

Other support 116 22 720 36 478 1,373

Housekeeping 102 29 393 4 381 908

Atypical staff 62 33 36 56 60 247

Total all staff FTE 1,708 321 4,681 201 3,09010,00

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Students by institution and origin

Origin

University Scotland RUK ROW Total Scotland RUK ROW

Glasgow Caledonian University 14,970 855 1,220 17,045 88% 5% 7%

Glasgow School of Art 820 435 300 1,555 53% 28% 19%

The University of Glasgow 18,630 2,540 2,420 23,590 79% 11% 10%

The RSAMD 440 130 110 680 65% 19% 16%

The University of Strathclyde 21,535 985 2,585 25,105 86% 4% 10%

56,395 4,945 6,635 67,975 83% 7% 10%

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Glasgow and Strathclyde

• Population (employment)• Scotland 5,095,000 (2,370,000)• Glasgow 578,000 (392,000)• Rest of Strathclyde 1,626,000 (566,000)

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Interactions over space (1)

• Where do Scottish students go?≈ 94% in Scotland≈ 33% in Glasgow

• Where do students in Glasgow come from?– Glasgow City 19%– Rest of Strathclyde 41%– Rest of Scotland 15%– Rest of UK 7%– Rest of World 18%

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• How do HEI students in Glasgow live?– Halls: 8.4%– Other/Not known: 11.3%– Own home / Private rental: 44.9%– Parental / Guardian home: 35.3%

• Where do they go to after graduation?*

– Glasgow City: 42%– Rest of Strathclyde: 28%– Rest of Scotland: 22%– Rest of UK: 5%– Rest of World: 3%

* According to a survey of EU students taken 6 months after graduation

Interactions over space (2)

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Interactions over space (3)

Before After Diff.

Glasgow City 19% 42% 23%

Rest of Strathclyde 41% 28% -13%

Rest of Scotland 15% 22% 7%

Rest of UK 7% 5% -2%

Rest of World 18% 3% - 15%

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Glasgow City IO

• Estimated using Location Quotients (LQ)– Based on augmented Scottish IO

• Simple approach• Not without faults

– Interregional trade ↓ → impact↑• Glasgow + ROS = Scotland

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Glasgow City IO (2)

• Employment → industrial structure– Sector Gross outputs– Primary inputs– Final demands

• Intermediate transactions– Scottish A-matrix * LQ’s

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Glasgow City IO (3)

Glasgow IO table Scotland IO table

Outputmultipliers

Import propensity

Outputmultipliers

Import propensityType I Type II

Type I Type II

Glasgow Caledonian University 1.04 2.50 27% 1.28 3.10 11%Glasgow School of Art 1.04 2.51 26% 1.27 3.11 11%The University of Glasgow 1.05 2.45 29% 1.32 3.10 11%The RSAMD 1.05 2.44 29% 1.32 3.10 11%The University of Strathclyde 1.05 2.40 31% 1.36 3.10 11%

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Simulation results:In a nutshell

• GDP impact: £856m – 5.6% of Glasgow GDP

• Of which:– Institutions and staff £628m – 4.1% of GGDP– Students £228m – 1.5% of GGDP

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Simulation results:Shutdown

GDP impact £m.

University Glasgow Scotland

Glasgow Caledonian University 102 123

Glasgow School of Art 17 20

The University of Glasgow 314 386

The Royal Scottish Academy of Music and Drama 10 13

The University of Strathclyde 184 232

Total 628 774

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Simulation results:Student impacts

GDP impact £m.

University Scotland RUK ROW Total

Glasgow Caledonian University 50 3 4 57

Glasgow School of Art 3 1 1 5

The University of Glasgow 62 9 8 79

The Royal Scottish Academy of Music and Drama 1 0 0 2

The University of Strathclyde 72 3 9 84

189 17 22 228% of Glasgow GDP 1.2% 0.1% 0.1% 1.5%

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Simulation results:External income + Scot Gov funding

GDP impact £m. Employment impact

Scenario £ m. % absolute %External income dries up -150 -1%   -3,561 -1%

External income doubles 150 1% 3,561 1%

HEI income from gov + £100 m 101 1% 2,401 1%

HEI income from gov + £100 m, other public spending in GLA -£100m 17 0% -323 0%

HEI income from gov + £100 m, balanced in national budget 75 0% 1,493 0%

HEI income from gov - £100 m, balanced in national budget -75 0%   -1,493 0%

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Model considerations

• Accuracy of multipliers– Suspect them to be overstated

• Boundaries– IO table implicitely captures ROS activity

• General IO limitations

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Future work

• Multi region IO– Interregional linkages

• Hybrid IO table– More accurate sub-regional multipliers

• SAM– Detailed treatment of households

• CGE– Introduce supply side